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| Boring Monday Keeps The Focus on Next Week | Mon, 22 Apr 2024 20:19:20 GMT
| | Boring Monday Keeps The Focus on Next Week
Monday may as well have been a 3rd weekend day as far as the bond market is concerned. While equities are preoccupied with earnings, bonds were trading at about HALF their normal clip based on the past 2 weeks of average volume. There were no relevant economic releases and really not even any interesting market moving headlines. Buyers pushed back against modest overnight weakness in the AM hours and then drifted mostly sideways in the PM hours. Days like this only intensify the focus on next week's important slate of events which include a Treasury refunding announcement, Fed announcement (with likely QT tapering on the agenda) and the jobs report.
Market Movement Recap
08:17 AM Modestly weaker overnight with 10yr yields up 3.3bps at 4.655 and MBS down 2 ticks (.06).
10:53 AM Back in positive territory, MBS up 3 ticks (.09) and 10yr down 0.4bps at 4.618
02:52 PM Best levels at noon, but dialing back a bit into the PM hours. Trading levels right in line with last update. MBS down 3 ticks (.09) from highs, but still up 3 ticks on the day.
03:52 PM Back near best levels. No particular reason or significance. MBS up 5 ticks (.16) and 10yr down 0.7bps at 4.616 |
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| Mortgage Rates Essentially Flat Just Under 5 Month Highs | Mon, 22 Apr 2024 20:01:00 GMT
| | Mortgage rates began the new week at almost exactly the same levels seen at the end of last week. There were no major events or economic reports to cause volatility in the underlying bond market, but bonds were able to improve modestly by the end of the day. In general, bond market improvement leads to lower rates. The catch, in this case, is the improvement was fairly small and that it was offset to some extent by modest weakness earlier in the day. Even so, a handful of lenders offered mid-day improvements. Other lenders will technically be more likely to improve tomorrow morning if bond market trading levels are unchanged (and that's not something that can be guaranteed or even assigned better than a 50% probability). By staying near Friday's levels, the average lender is just shy of the highest rates in 5 months. A top tier conventional 30yr fixed scenario is still in the mid 7% range. Volatility will definitely be higher next week due to the calendar of events, but it could start increasing in the coming days as well. There's no directional connotation to "volatility." It's an inherent 2-way street. The direction of the movement will depend on the tenor of the data. It looks like rates are at least willing to treat current levels as a ceiling, but only if we finally see some friendlier data--something that's been hard to come by since February. |
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| Piggyback, 2nds, POS Products; G-Rate’s CEO Podcast Interview; Agency News | Mon, 22 Apr 2024 15:28:27 GMT
| | When I was a kid, whenever I would walk by a pay phone or newspaper vending machine, I’d check the coin change slot. Or periodically check under my Dad’s La-Z-Boy… every penny or dollar counted! (Nowadays, I still get excited when I find a forgotten quarter in my own pants or backpack.) Plenty of folks at last week’s Great River Conference were trying to do the modern equivalent of that by learning about the current vendor offerings of technology, or meeting with their current vendors to see if pennies or dollars could be saved on every loan given the current $12k+ cost per funded loan. Smart and compliant speed and efficiency are critical… speaking of which, found here, today’s podcast features an interview with Guaranteed Rate’s Victor Ciardelli on the company’s goal of closing a loan in one-day and how they will get there. This week’s podcasts are sponsored by Calque. With The Trade-In Mortgage powered by Calque, homeowners can buy before they sell, make non-contingent offers, and tap their home equity to fund the down payment on their next home. Lender and Broker Products, Software, and Services When people say they can see miles and miles on a clear day, they aren’t wrong: the horizon is about 3 miles away, with some variation depending on your height. And whatever may lie beyond, Dark Matter Technologies is helping lenders prepare with its first annual Horizon user conference. The event kicks off Wednesday at the Fontainebleau Miami Beach and will bring together hundreds of industry notables to network, get the inside scoop on Dark Matter’s innovation roadmap, and explore business trends including market growth strategies, AI, and cybersecurity. Feeling a little FOMO? Request a consultation today and your team could be working smarter with the Empower LOS, and catching some Florida sun, by this time next year. |
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| Slow Start to What May be a Slow Week | Mon, 22 Apr 2024 12:47:08 GMT
| | It's no secret that a vast majority of bond market movement these days occurs in response to a small handful of economic reports and the Fed's quarterly updates on the rate hike outlook (via the dot plot). That means we see several weeks each month without any big ticket market movers. This week arguably qualifies. But how could that be, considering Friday's PCE price index is the same one the Fed refers to as its preferred gauge of the 2% inflation target? PCE just hasn't caused big reactions for a few reasons (similarity to CPI and predictability due to other data that comes out earlier).
Assuming the track record of nonreactions continues, the typical pattern of volatility remains intact as the following week brings big ticket data and a Fed announcement (no updated dot plot, and no rate cut, but there could be some change to policy that we'll discuss next week).
On the topic of volatility, bonds are off to a slow start this week, with no major escalation in the Middle East over the weekend. Some analysts attribute the modest bump in stock prices and bond yields to that absence of flight-to-safety trading. |
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| Sometimes Sideways is The Best Case Scenario | Fri, 19 Apr 2024 20:32:20 GMT
| | Sometimes Sideways is The Best Case Scenario
Granted, there was a possibility that today could have been a rally day for the bond market, but as seen in the overnight trading session, that possibility depended on the escalation of war in the Middle East. There aren't many other reasons for bonds to push back too much on recent weakness. One of the only other reasons would be Friday position squaring and short covering, but that would be just as much of an indication of ongoing bearishness in bonds. In that sense, holding sideways is possibly the best victory we could have hoped for today. The fact that we've avoided Tuesday's high yields through the end of the week could even signal sideways vibes until May, at which point data and the Fed will let us know the direction of the next big move.
Market Movement Recap
09:38 AM Initially stronger overnight, but giving up gains since then. 10yr down 1.7bps at 4.609. MBS up 1 tick (.03).
10:27 AM 10yr all the way back to unchanged at 4.627. MBS down 2 ticks (.06)
02:02 PM Broadly sideways and choppy, but currently unchanged in MBS and 10yr.
04:27 PM Still sideways. MBS up 1 tick (0.03) and 10yr down half a bp at 4.622 |
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| The Case of The Disappearing Rate Cuts | Fri, 19 Apr 2024 20:30:00 GMT
| | The Fed expected to be able to cut rates 3 times in 2024 as recently as March. Financial markets agreed. But the data that's come out since then has everyone singing a different tune. This week's data was more of an afterthought compared to last week's. The chart above pertains to Fed rate expectations, and that's not exactly the same as longer term rates like mortgages and 10yr Treasury yields. The latter saw a bit more volatility this week. Monday's Retail Sales data was much stronger than expected and markets reacted immediately. Tuesday's data was consequential, but it was followed by a speech in which Fed Chair Powell had an opportunity to provide some updated thoughts on the rate outlook. After all, the Fed hadn't seen the most recent CPI data (and several other strong reports) at the time the last round of rate projections came out in March. As the market expected, the tone is evolving. While Powell and the Fed repeat that the rate path depends on economic data, it's no surprise to see recent comments acknowledging a surprising amount of strength in the recent data. Stronger data means fewer rate cuts. Powell went as far as saying there was new uncertainty as to whether the Fed will even be able to cut in 2024. Two days later, NY Fed President John Williams struck similar tone. Just last week, he had pushed back on the CPI data, saying the Fed wasn't surprised by setbacks in the inflation data. This week's comments did more to acknowledge the other side of data dependency. Specifically, Williams said the Fed could hike again if the data called for it. |
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| Cybersecurity, TPO, Verification Tools; Tech Tracking Whereabouts; Why Rates Are Where They Are | Fri, 19 Apr 2024 15:33:15 GMT
| | It is “Take Your Child to Work Day” next Thursday which, if you work from home, is probably like a day off from school for the tyke. (I won’t be bringing my son Robbie to work, who, as I write this, is pedaling from Chicago to New York and bunked down last night in Union Home’s Bill Cosgrove’s humble abode.) I do not track his exact whereabouts, but we all know that, in having a smart phone, one gives up pretty much all of their privacy. For example, a new working paper posted to the National Bureau of Economic Research sought to examine the polling data that indicates 22 percent of Americans reported attending religious services on a weekly basis. They did this by looking at geodata from smartphones of 2 million people in 2019, and found that while 73 percent of people did indeed step into a place of worship on a primary day of worship at least once over the course of the year, just 5 percent of Americans studied in fact did so weekly, significantly smaller than the data people reported to pollsters. (Found here, this week’s podcasts are sponsored by Optimal Blue. OB's smart solutions automate critical functions like pricing, hedging, trading, and social media. More originators and investors rely upon Optimal Blue's integrated solutions, data, and connections to support their unique business strategies, no matter how complex. Hear an interview between Robbie and me on a variety of topics in mortgage that are germane to the Daily Commentary.) Lender and Broker Products, Software, and Services |
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| Gradually Pulling Back From Flight to Safety Bid Overnight | Fri, 19 Apr 2024 14:06:18 GMT
| | The overnight session began with a very clear flight to safety in stocks (sell) and bonds (buy) on headlines regarding increased hostilities between Iran and Israel. There have been plenty of "increased hostility" headlines this week that have not had much impact. These were different because the initial newswires played up the risk to Iran's nuclear sites. Shortly thereafter, the IAEA said there was no damage to nuclear sites and Iran said there were no plans for retaliation, despite previous warnings to the opposite effect. With that, stocks and bonds began grinding back in the other direction--an effort that continues into early domestic trading. |
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| Good News and Bad News About Today's Selling | Thu, 18 Apr 2024 19:55:13 GMT
| | Good News and Bad News About Today's Selling
The bad news is that bonds resumed their weaker tendencies today with 10yr yields moving back up into the 4.6's. Culprits included stronger economic data, hawkish Fed comments, and possibly the fact that the previous day's gains were driven by corrective short-covering. The good news is a bit of stretch to be considered as such. In order to do so, we must consider that today's high yields stopped well short of the high yields seen on Tuesday. This pattern of "lower highs" is often seen at the beginning of a sideways consolidation, effectively ending the previous directional trend (at least for the time being). It's a bit too soon to conclude that's the way things will play out this time, but on an objective note, today was the first time since April 5th that yields made it past the 48 hour mark without hitting a higher high.
Econ Data / Events
Jobless Claims
212k vs 215k f'cast, 212k prev
Philly Fed Index
15.5 vs 1.5 f'cast, 3.2 prev
Philly Fed Prices
23.0 vs 3.70 prev
Market Movement Recap
08:37 AM roughly unchanged overnight a hair weaker after data. MBS down 1 tick (.03) and 10yr up 1.7bps at 4.606.
09:41 AM Back to weakest levels after NYSE open. MBS down an eighth. 10yr up 3.6bps at 4.625.
12:39 PM More Losses. MBS down 10 ticks (.31). 10yr up 5.4bps at 4.644
03:13 PM hovering sideways near weakest levels. MBS down 9 ticks (.28). 10yr up 4.8bps at 4.638 |
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| Mortgage Rates Higher Today, But Not Quite as High as Tuesday | Thu, 18 Apr 2024 19:36:00 GMT
| | Tuesday marked the highest mortgage rates since November, capping a mini surge that began after last week's inflation data. After a moderate improvement yesterday, rates moved back up toward (but thankfully not above) the recent highs today. Financial markets reacted to stronger economic data and comments from Federal Reserve officials regarding the possibility of no Fed rate cuts in 2024 and even a small chance of rate hikes. Importantly, Fed members don't see hikes as being likely and the economic data would have to accelerate enough to justify a change in strategy. We're definitely not there yet, but we're just as certainly not there when it comes to lower inflation readings required to validate the first rate cut. At the March Fed meeting, officials still saw 3 cuts by the end of the year, albeit just barely. Based on data that's come out since then, markets are betting on only one cut. Other news sources are running headlines regarding a big jump in mortgage rates to 7.10% based on Freddie Mac's weekly survey results released today. Keep in mind that's a weekly number based on average of last Thursday through yesterday and that it doesn't account for the impact of discount points. In other words, rates are definitely not 7.1 today, and especially not without points. |
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